FirstEnergy (NYSE:FE) has passed the halfway point of the first phase of its “Energizing the Future” transmission investment initiative to meet the reliability needs of its customers and communities, and remains on track to meet its target of $4.2bn in spending during the 2014 through 2017 timeframe, FirstEnergy President and CEO Charles Jones said during the company’s 4Q15 earnings conference call.
“Consistent with our plan, we spent $2.4bn in 2014 and 2015, including $986m last year on projects to address service reliability, grid modernization and growth,” he said. “We completed major initiatives to address last year’s northeast Ohio plant deactivations and brought online critical new infrastructure to support midstream gas operations in our region. Work in 2016 is expected to include $1bn in investments on projects such as synchronous condensers at our Eastlake plant, new line construction projects in West Virginia and New Jersey, static VAR compensator projects in Pennsylvania, New Jersey and West Virginia, and several new substations, line rebuilds and reconductoring projects.”
Jones also noted that FERC has approved the settlement for a forward-looking formula rate structure at FirstEnergy’s American Transmission Systems Inc. (ATSI) subsidiary, which permits more timely recovery of the company’s investments.
“In addition, in June, we filed to create a new subsidiary named Mid-Atlantic Interstate Transmission, or MAIT,” he said. “This subsidiary would hold the transmission assets of Met-Ed, Penelec and JCP&L, and facilitate new investments that can improve service reliability for those customers. Our proposal is on FERC’s agenda for tomorrow and we are seeking approval from both the Pennsylvania Public Utility Commission and the New Jersey Board of Public Utilities by the middle of the year. These structural changes are important steps to ensure timely recovery of our investments and set the stage for continued growth through our Energizing the Future transmission initiative.”
Jones also noted that FirstEnergy took important steps to position its regulated utilities for growth with the conclusion of rate cases in West Virginia, New Jersey and Pennsylvania.
“Resolving these cases allows us to plan for additional infrastructure and reliability investments at those utilities,” he said. “In Pennsylvania, we took that next step by filing long-term infrastructure improvement plans for each of our four operating companies in October. These plans, which were approved by the Pennsylvania Public Utility Commission last week, outline a projected increase in capital investment of nearly $245m over five years to help strengthen, upgrade and modernize our Pennsylvania distribution systems.”
The company recently filed for approval to implement a distribution system improvement charge at each of the four operating companies, which will allow the company recover quarterly costs associated with certain capital projects, he said.
In Ohio, FirstEnergy achieved an important milestone for its latest electric security plan by reaching a settlement agreement with the staff of the Public Utilities Commission of Ohio (PUCO) as well as 16 other parties.
“The agreement outlines ambitious steps to safeguard Ohio customers against retail price increases and volatility in future years, deploy new energy efficiency programs, and provide a clear path to a cleaner energy future by reducing carbon emissions,” he said. “Our settlement includes an eight-year retail rate stability rider associated with a proposed purchase power agreement. This provision will help protect customers against rising retail prices and market volatility, while helping preserve vital base load power plants that serve Ohio customers and provide thousands of jobs in the state.”
The procedural schedule for the Ohio case is nearly complete, with hearings concluded, initial briefs filed, and reply briefs due soon, he said, adding that a decision from the PUCO is expected in March.
“We firmly believe that our plan serves the best interests of Ohio customers and Ohio communities while supporting competitive markets in the state and PJM [Interconnection],” Jones said. “This generation will continue to be offered into PJM’s energy and capacity markets and the PPA will have no impact on our standard service offer or customers’ ability to shop for their retail electric supply. In fact, we expect that the output from these plants will be treated no differently than the 20% of regulated generation that currently clears in the PJM markets and that 20% does not include imports into PJM, which from [the Midcontinent ISO (MISO)], would be primarily regulated generation.”
Among other things, he said that the company took an important step to improve its financial metrics and balance sheet in 2015 through the launch of the cash flow improvement project.
“This initiative began in the spring, with a goal to capture meaningful and sustainable savings opportunities and process improvements across the company, while continuing to fully meet the needs of our customers, our organization and our employees,” Jones said.
The company is on track to capture $155m in savings this year, and $240m annually by 2017, up from its initial goal of $200m over the time frame, he said, adding, “The results from this initiative will allow us to essentially hold our O&M flat through 2017.”
First Energy on Feb. 16 reported full-year 2015 operating (non-GAAP) earnings of $2.71 per basic share of common stock, in line with the company’s most recent guidance range. Those results exclude the impact of the special items listed below and compare to full-year 2014 operating (non-GAAP) earnings of $2.56 per basic share of common stock, the company said.
On a GAAP basis, the company reported 2015 net income of $578m, or $1.37 per basic and diluted share of common stock, on revenue of $15bn.
GAAP net income in 2014 was $299m, or 71 cents per basic and diluted share of common stock, on revenue of $15bn, the company added.
FirstEnergy said that 4Q15 operating (non-GAAP) earnings were 58 cents per basic share of common stock, compared to 80 cents per basic share in 2014. On a GAAP basis, the company reported a net loss of $226m, or 53 cents per basic and diluted share of common stock, on revenue of $3.5bn in 4Q15, and a net loss of $306m, or 73 cents per basic and diluted share of common stock, on revenue of $3.5bn in 4Q14, the company said.